New South Wales to Set Reserve Prices in Power Sale

By Angela Macdonald-Smith

March 23 (Bloomberg) -- New South Wales, Australia’s most- populous state, will set reserve prices for the power assets to be sold by the government to ensure taxpayers get “the best possible returns,” Energy Minister Ian Macdonald said.

While there should be no political impediment to the planned sale of electricity retailers, power trading contracts and new generator development sites, the economic crisis may affect the timetable, Macdonald said today at a conference in Sydney. Opposition to the sale from labor unions should be less than for an earlier, larger-scale sale plan, he said.

The state aims to complete the sale by year-end after it carries out consultations with potential bidders on the details of the process, Finance Minister Joe Tripodi said March 5. The sale may raise half the A$10 billion ($6.9 billion) earlier estimated after the plan was scaled back and as the credit crisis discourages bidders, Fitch Ratings said.

“We’re confident that this will be a contested process,” Macdonald said. “There’s no doubt market conditions are going to have to play a role in this strategy.”

AGL Energy Ltd. and Origin Energy Ltd., the nation’s two biggest electricity and gas retailers, have both said they may bid for assets in the sale. TRUenergy Pty, owned by CLP Holdings Ltd., said last week any investments in Australia are on hold due to uncertainty about the government’s carbon trading plans.

A government-backed carbon capture and storage project being carried out at Delta Electricity’s Munmorah power station on the state’s central coast may be expanded, Macdonald said. The investment cost would be shared between the state and federal governments, the coal industry and the generator, he said.

Japan, South Korea and China have expressed interest in the technology, which can be bolted onto existing coal-fired generators to reduce emissions blamed for global warming, the minister said.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net